After trying to bail out Wall Street and Big Banks the old fashioned way (i.e., just hand them Federal money with few or no strings attached) suddenly Federal Reserve Chairman Ben Bernanke has decided it might be wise to take steps to put the brakes on all those foreclosures of all those mortgages that only God knows who owns anymore:
WASHINGTON, Dec 4 (Reuters) – U.S. Federal Reserve Chairman Ben Bernanke on Thursday urged more aggressive action to halt home foreclosures, and said write-downs of principal may need to be part those efforts.
“Despite good-faith efforts by both the private and public sectors, the foreclosure rate remains too high, with adverse consequences for both those directly involved and for the broader economy,” he said at a Fed conference on housing and mortgage markets. “More needs to be done.”
Bernanke said evidence that homeowner equity is an important determinant of default rates points to a need to write down loan principal to help people stay in their homes.
“Principal write-downs may need to be part of the toolkit that servicers use to achieve sustainable mortgage modifications,” he said.
The Fed chairman said a number of proposals — all using public funds — hold promise for slowing foreclosure rates.
These include a Federal Deposit Insurance Corp plan that would reward participating lenders by sharing the cost of defaults on restructured loans. The FDIC, the bank regulatory agency that manages the fund that insures bank deposits, says the plan would prevent 1.5 million foreclosures.
Bernanke also said a program aimed at putting delinquent borrowers into new home loans insured by the Department of Housing and Urban Development’s Federal Housing Administration might attract more participants if the Treasury Department bought securities issued by Ginnie Mae.
Memo to Ben: you’re a little late to this party. Many, many people have been proposing the government take action to limit foreclosures, with a foreclosure moratorium the idea that I find the most likely to have any immediate impact.
Your speaking up now strikes me as too little and too late to have much effect, and the steps you champion are unlikely to be accomplished so long as President Bush keeps his cold dead hand on US economic policy (or lack thereof). I believe he and his lackey Henry “The Tone Deaf” Paulson have already deep-sixed the FDIC plan you spoke so glowingly about. And I don’t see any financial institution with securitized mortgage backed assets voluntarily writing down the value of their holdings no matter how crappy we all know they really are. But at least future generations will acknowledge your attempt at CYA.
The last guy to get help is the average Joe. Wall Street Bankers, go begging in their 1500 hundred dollar suits and get whatever they want. It should not go unnoticed that Republicans favored Wall Street over Main Street in this current fiasco.
But at least W hasn’t suspended Congress..like the Canadians did:
http://news.yahoo.com/s/ap/20081204/ap_on_re_ca/canada_political_crisis
As I said in the beginning of this:
Come on guys, let’s get serious. We can start by finding how much in debt each bank is. Ascertain the value of those toxic assets, bank by bank, and then disclose the final figures, horrible as they may be. Let the bankers (bonkers) take their just punishments in public condemnation. Oh, yes, they can give up their special bonuses and golden parachutes as well. and, their sense of entitlement too. We ordinary folk owe nothing to them cuz of their high birth and status.
When the financial bloodletting finally settles down, let the Feds loan money to those banks still remaining. Sure the national government has to reconstruct things but the process should begin on firm foundations and bankers who have a modicum of intelligence. Sure hope that is not an oxymoron, banker, intelligence.
Considering all the pain that our society is going to endure, I am sure their will be ample support for regulation of the financial industry. Simultaneously, we can apply a similar strategy to the automotive industry. The keys are, I think, transparency and accountability both of which concepts seem in short supply in present times.
When the financial bloodletting finally settles down, let the Feds loan money to those banks still remaining.
we’re talking printing up at a minimum $62 trillion to cover 10% of $600 trillion OTC Derivatives. So far close to $9 trillion has been injected through the back door without oversight.
That’s translate to a very DEAD dollar.
Wall Street gets the cream and strawberries. Main Street, the underpinning of the economy, gets to suck salt blocks.
Both Hank and Benny are without respect. If the auto guys aren’t helped we face a crisis that will tank Obama. And imho, a deliberate handing over in January of a poison chalice while Paulson and cronies helped themselves.
We won’t be spared all the sorrows ahead.
The auto manufacturers are going down. Home foreclosures are rampant. Few are buying anything they can’t eat or burn in their cars. Our currency and treasury notes will soon be anathema to foreign investors. I think Jim Kunstler is on to something in his writings. Some very serious shit is heading towards the fan. No soft landing here. It’s no wonder the government wants 20,000 U.S. troops augmenting various National Guard units. Probably some frantic reviewing of martial law procedures going on in various state capitals.
I assume that Hank’s cronies have bought up a bunch of distressed mortgages at fire sale prices and now Hank is going to shore them up to make a good profit on them.
P.S. I guess he doesn;t know anyone who owns auto stock or they are trying to push it down further to benefit the short sellers.
Naw, the auto industry stuff is easy to explain. Free market ideologues like Paulson are seeing their plans finally come to fruition – this is a chance to deal a fatal blow to unions in the US. Which is something these guys have been trying to do since forever. That’s what NAFTA was all about. That’s what “free trade” all over the world is all about. Killing the unions as a political force. And they’ll press every advantage to do it, even if it means destroying the economy to do it.
They’re idiots, but idiots with a laser-like focus on destroying their enemies. Dangerous idiots.
Given the numbers that were near a million foreclosures that were tossed out last month… Do you think they have transferred enough of people’s homes over to the banks yet?
Every dollar they give the banks is another dollar put towards sitting on foreclosed homes and other assets (commodities) that are all over inflated from speculation.
The main reason gas prices have bottomed out? Demand is a small part of it. The biggest reason is all of the commodities that have been liquidated to help the banks meet their gambling debts.
Which kind of proves the fact that speculators were always the cause of high prices on gas after all…
Never mind the criminally negligent shadow bank gambling that should have stockholders suing the CEOs and management, and the feds prosecuting them all. That is all a matter of ethics and knowing negligence. (And, yes! They did know what they were doing.)
We really do need “fair trade” practices on all of the little things we need to live (homes, energy, food, etc.) because the market speculation on them all poses a serious threat to our economic national security.
I bet that thought will make some of the die-hard-free-run-amok-market capitalist heads explode.
The moratorium will have the most immediate impact. But not a good impact. As Irvine Renter says here, this is a foolish idea: http://www.irvinehousingblog.com/blog/comments/moritorium-on-defaults-announced/
I know it seems like this would help people and is the liberal do-gooder thing to do. But, it will be BAD for the majority of our population and our economy. The only “benefit” is it wold give is a very few people would live free rent for a couple of extra months (many of the underwater homedebtors will not only have lived in a much more expensive home than they otherwise could afford but many will also ive rent free for a long time). The other “benefit” is it makes Bush and Paulson look like they’re doing something (notice they still won’t agree to wholesale principal reduction–they want it as one “tools” in a program which is basically taxpayers paying underwater mortgages directly). Of course, the real reason is that it helps banks a little bit by giving taxpayer money to banks directly via mortgage payments so that it may encourage a few more suckers to keep paying the banks for a little while longer. They probably realize it won’t save the banks but they may as well bleed these underwater homedebtors as much as they can.
It’s a terrible short term idea that will only make it harder to recover from this depression. You want to tack 6 or 9 months of this recovery off for later. We need home prices to come down to a reasonable level to have a sustainable economy in the FUTURE. Trying to delay our medicine will only make it worse.
This is exactly what Japan tried. They tried to prop up their housing market and of course all the liberal do gooders there probably thought that was the way to help the majority of the people in the best way. Let a bubble deflate slowly. They are now going on 2 decades of slowly declining house prices.